Your firm has an average receipt size of $95. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 9,400 checks per day. The daily interest rate is .016 percent. If the bank charges a fee of $190 per day, should the lockbox project be accepted? What would the net annual saving be if the service were adopted?
a. The average daily collections are the number of checks received times the average value of a check, so:
Average daily collections = 95(9,400)
Average daily collections = 893,000
The present value of the lockbox service is the average daily receipts times the ...
The solution explains how to make the accept/reject decision for a lockbox project